What is your debt-to-income ratio?
If you're looking for a bit of good news, there are probably better places to start than turning on the TV or radio to get the latest update on the UK economy.
Since the recession, here in Britain we've seen a gloomy picture painted of the nation's finances, with growing debts, falling real incomes and general financial dissatisfaction widespread.
Moreover, the first Which? Quarterly Consumer Report (July 2012) shows that things remain far from upbeat for the nation's bank balances.
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Worryingly, the report revealed that for every pound earned, the average person owes 21p - more than a fifth of their income. Furthermore, young people in the 18-29 age bracket are bearing an even heavier debt burden - owing 47p for every pound that they earn.
But what effects could your debt-to-income ratio have on your overall finances - and what steps could you take to steer clear of debt problems?
Debt-to-income ratio: what does it mean?
'Debt-to-income ratio' is a technical term, commonly used in the US, that shows how much of a person's monthly gross income (whatever's earned before tax and other deductions) goes towards repaying their debts.
Debt-to-income ratio is often shortened to 'DTI'. Strictly speaking, this often covers more than just debts, as it can also include some taxes and types of insurance premium.
Your debt-to-income ratio can have a big impact on your finances: after all, if a large chunk of your income is eaten up by repaying your debts, it could put serious pressure on other areas of your finances and push you into problems.
Are your debts overtaking your income?
If you find that your monthly debt repayments are taking up a large part of your income, you could be putting yourself at serious risk of debt problems.
However, the earlier you can take action, the sooner you could get your finances into shape and stop things from getting worse. If you'd like to get some idea of the options that could be open to you, you could visit Debt Advisory Centre - who wrote this article - for some debt tips and information on the debt solutions that are available in the UK.
For some people, moving some money around their budget will be enough to 'free up' what they need to cover their debt repayments - and still leave them enough to cover their living costs. For instance, switching to a cheaper utilities provider and/or buying cheaper brands at the supermarket could help you to save a fair amount of money every month - which could be used to go towards your monthly costs.
But for people who simply aren't earning enough to cover the cost of their debts, a professional approach could be the only realistic way forward.
A debt management plan, for example, could lower your payments to a level you can realistically afford, or an Individual Voluntary Arrangement (IVA) could help you to repay what you can afford, and write off the debt you can't. (Note that both of these approaches will affect your credit rating.)
If you're not sure how best to deal with your debts, a professional should be able to give you the answers you're looking for.